SB1102 - 501R

Be it enacted by the Legislature of the State of Arizona:

Section 1. Section 20-156, Arizona Revised Statutes, is amended to read:

START_STATUTE20-156. Examination of insurers; financial surveillance fund; definition

A. The director shall examine the affairs, transactions, accounts, records and assets of each authorized insurer as often as the director deems advisable. The director shall so examine each domestic insurer, domestic life and disability reinsurer as defined in section 20‑1082, service company as defined in section 20‑1095 and mechanical reimbursement reinsurer as defined in section 20‑1096 at least once every five years. Examination of an alien insurer shall be limited to its insurance transactions in the United States.

B. The director shall in like manner examine each insurer applying for an initial certificate of authority to do business in this state.

C. In lieu of making an examination, the director may accept a full report of the last recent examination of a foreign or alien insurer, certified to by the insurance supervisory official of another state, territory, commonwealth or district of the United States.

D. The director may examine the affairs, transactions, accounts and records of the state compensation fund as often as the director reasonably deems advisable. The results of such examination shall be the basis for any advisory recommendations which the director deems necessary regarding the operations of the state compensation fund.

E. D. The expenses of the examinations conducted under this section shall be paid by the insurance examiners' revolving fund as provided in section 20‑159. Such expenses shall be limited to preexamination selection and preparation costs, examination costs, postexamination costs and other such costs of evaluations of compliance required by law.

F. E. The financial surveillance fund is established consisting of monies collected pursuant to subsection G F of this section. The fund is a special state fund pursuant to section 35‑142, subsection A, paragraph 8. Monies in the fund do not revert to the state general fund. The department shall administer the fund. Monies in the fund are continuously appropriated and are exempt from the provisions of section 35‑190 relating to lapsing of appropriations.

G. F. The director shall annually assess and collect from each domestic insurer, other than a domestic life and disability reinsurer as defined in section 20‑1082, a service company as defined in section 20‑1095, and a mechanical reimbursement reinsurer as defined in section 20‑1096, an amount within the ranges provided in this subsection and on a uniform percentage basis among all fee categories, to pay the costs of employing financial analysts who shall assist the department in conducting financial surveillance of domestic insurers. The director shall deposit all collected monies in the financial surveillance fund. The director shall base the amount of each insurer’s assessment on the total admitted assets of the insurer as shown in its annual statement for the calendar year preceding the year in which the assessment is made, according to the following schedule:

Minimum Maximum

Assessment Amount Assessment Amount

Insurers with total admitted

assets of greater than

$1,000,000,000 $15,000 $22,500

Insurers with total admitted

assets of at least $200,000,000

but not more than $1,000,000,000 $ 5,000 $ 7,500

Insurers with total admitted

assets of at least $100,000,000

but not more than $199,999,999 $ 3,000 $ 4,500

Insurers with total admitted assets

of at least $50,000,000 but not

more than $99,999,999 $ 1,500 $ 2,250

Insurers with total admitted assets

of at least $25,000,000 but not

more than $49,999,999 $ 500 $ 750

Insurers with total admitted

assets of not more than

$24,999,999 $ 250 $ 375

H. G. For the purposes of this section, "insurer" includes health care services organizations, prepaid dental plan organizations, hospital service corporations, medical service corporations, dental service corporations and hospital, medical, dental and optometric service corporations incorporated in this state. END_STATUTE

Sec. 2. Section 20-363, Arizona Revised Statutes, is amended to read:

START_STATUTE20-363. Availability of services of rating organization to members

A. Subject to rules and regulations that have been approved by the director as reasonable, each workers' compensation rating organization shall permit any insurer writing workers' compensation insurance in this state to become a member. The rating organization shall give its members notice of proposed changes in its rules and regulations.

B. Each rating organization shall furnish its rating services without discrimination to its members.

C. Any member or insurer may request that the director review the reasonableness of any rule or regulation in its application to members at a hearing held on at least ten days' written notice to the rating organization and to the member or insurer. If the director finds that the rule or regulation is unreasonable in its application, the director shall order that the rule or regulation does not apply.

D. Every insurer writing workers' compensation insurance in this state, including the state compensation fund, shall be a member of one workers' compensation rating organization.

E. A rating organization shall have as members at least five insurers authorized to write and who are writing workers' compensation insurance in this state and whose combined experience is determined by the director to be reasonably adequate for rate making purposes.

F. In a rating organization of which the state compensation fund is a member, the state compensation fund shall be entitled, without election, to membership on any committee established in connection with the operation of the rating organization in this state. One‑half of the members of each committee shall be chosen by the stock insurers and one‑half by the nonstock insurers.

G. Neither the provisions of this section nor the rules, regulations or rating plans of a rating organization affect or apply to self‑rating plans and rates and charges fixed by the state compensation fund under section 23‑983. END_STATUTE

Sec. 3. Section 20-367, Arizona Revised Statutes, is amended to read:

START_STATUTE20-367. Workers' compensation appeals board; composition

A. A workers' compensation appeals board is established in the department.

B. The board shall have at least nine but not more than eleven members who are appointed by the director. The members shall serve three year terms. A member shall not serve more than two consecutive terms.

C. The board shall be comprised of at least:

1. The following voting members:

(a) Five representatives of insurers, one of which is the state compensation fund insurer with the largest Arizona workers' compensation market share as reported by the department of insurance in its latest annual report. Any licensed rating organization that meets the requirements prescribed in section 20‑363, subsection E may nominate from its membership in this state one representative for each complete twenty per cent share of the total statewide workers' compensation net written premium for the preceding calendar year attributable to its membership. The director shall appoint any remaining insurer representatives needed to constitute five members as ratably as possible based on distribution of the total statewide workers' compensation net written premium for the preceding calendar year.

(b) Four representatives of the public. At least two shall be representatives of employers, and the remaining public members shall be persons who are knowledgeable about workers' compensation insurance.

2. A One representative from any designated statistical agent who shall serve as a nonvoting advisory member.

D. The board members shall select a chairperson who shall call meetings as needed to consider requests made pursuant to section 20‑367.01 or on request of the director.

E. The board shall submit to the director a plan of operation and all amendments that are necessary or suitable to ensure the fair, reasonable and equitable administration of the appeals process. The plan of operation and all amendments are effective on approval by the director.

F. Subject to the powers of the director, the board shall review appeals that are filed pursuant to section 20‑367.01. The board may affirm the action of the rating organization or insurer or direct any rating organization or insurer to modify or reverse its application of the rating system that resulted in the appeal.

G. Members of the board are not eligible to receive compensation or travel expenses under title 38, chapter 4, article 2.

H. The board established by this section terminates on July 1, 2010 pursuant to section 41‑3102.END_STATUTE

Sec. 4. Section 23-901, Arizona Revised Statutes, is amended to read:

START_STATUTE23-901. Definitions

In this chapter, unless the context otherwise requires:

1. "Award" means the finding or decision of an administrative law judge or the commission as to the amount of compensation or benefit due an injured employee or the dependents of a deceased employee.

2. "Client" means an individual, association, company, firm, partnership, corporation or any other legally recognized entity that is subject to this chapter and that enters into a professional employer agreement with a professional employer organization.

3. "Co‑employee" means every person employed by an injured employee's employer.

4. "Commission" means the industrial commission of Arizona.

5. "Compensation" means the compensation and benefits provided by this chapter.

6. "Employee", "workman", "worker" and "operative" means:

(a) Every person in the service of the state or a county, city, town, municipal corporation or school district, including regular members of lawfully constituted police and fire departments of cities and towns, whether by election, appointment or contract of hire.

(b) Every person in the service of any employer subject to this chapter, including aliens and minors legally or illegally permitted to work for hire, but not including a person whose employment is both:

(i) Casual.

(ii) Not in the usual course of the trade, business or occupation of the employer.

(c) Lessees of mining property and their employees and contractors engaged in the performance of work which that is a part of the business conducted by the lessor and over which the lessor retains supervision or control are within the meaning of this paragraph employees of the lessor, and are deemed to be drawing wages as are usually paid employees for similar work. The lessor may deduct from the proceeds of ores mined by the lessees the premium required by this chapter to be paid for such employees.

(d) Regular members of volunteer fire departments organized pursuant to title 48, chapter 5, article 1, regular firemen of any volunteer fire department, including private fire protection service organizations, organized pursuant to title 10, chapters 24 through 40, volunteer firemen serving as members of a fire department of any incorporated city or town or an unincorporated area without pay or without full pay and on a part‑time basis, and voluntary policemen and volunteer firemen serving in any incorporated city, town or unincorporated area without pay or without full pay and on a part‑time basis, are deemed to be employees, but for the purposes of this chapter, the basis for computing wages for premium payments and compensation benefits for regular members of volunteer fire departments organized pursuant to title 48, chapter 5, article 1, or organized pursuant to title 10, chapters 24 through 40, regular members of any private fire protection service organization, volunteer firemen and volunteer policemen of these departments or organizations shall be the salary equal to the beginning salary of the same rank or grade in the full‑time service with the city, town, volunteer fire department or private fire protection service organization, provided if there is no full‑time equivalent then the salary equivalent shall be as determined by resolution of the governing body of the city, town or volunteer fire department or corporation.

(e) Members of the department of public safety reserve, organized pursuant to section 41‑1715, are deemed to be employees. For the purposes of this chapter, the basis for computing wages for premium payments and compensation benefits for a member of the department of public safety reserve who is a peace officer shall be the salary received by officers of the department of public safety for their first month of regular duty as an officer. For members of the department of public safety reserve who are not peace officers, the basis for computing premiums and compensation benefits is four hundred dollars a month.

(f) Any person placed in on‑the‑job evaluation or in on‑the‑job training under the department of economic security's temporary assistance for needy families program or vocational rehabilitation program shall be deemed to be an employee of the department for the purpose of coverage under the state workers' compensation laws only. The basis for computing premium payments and compensation benefits shall be two hundred dollars per month. Any person receiving vocational rehabilitation services under the department of economic security's vocational rehabilitation program whose major evaluation or training activity is academic, whether as an enrolled attending student or by correspondence, or who is confined to a hospital or penal institution, shall not be deemed to be an employee of the department for any purpose. Any dividend which the department's vocational rehabilitation program may be entitled to receive from the state compensation fund because of a favorable loss experience for any policy period shall not revert to the state general fund but shall be applied to the department's current premium obligations for workers' compensation coverage for such program.

(g) Regular members of a volunteer sheriff's reserve, which may be established by resolution of the county board of supervisors, to assist the sheriff in the performance of the sheriff's official duties. A roster of the current members shall monthly be certified to the clerk of the board of supervisors by the sheriff and shall not exceed the maximum number authorized by the board. Certified members of an authorized volunteer sheriff's reserve shall be deemed to be employees of the county for the purpose of coverage under the Arizona workers' compensation laws and occupational disease disability laws and shall be entitled to receive the benefits of these laws for any compensable injuries or disabling conditions which that arise out of and occur in the course of the performance of duties authorized and directed by the sheriff. Compensation benefits and premium payments shall be based upon the salary received by a regular full‑time deputy sheriff of the county involved for the first month of regular patrol duty as an officer for each certified member of a volunteer sheriff's reserve. This subdivision shall not be construed to provide compensation coverage for any member of a sheriff's posse who is not a certified member of an authorized volunteer sheriff's reserve except as a participant in a search and rescue mission or a search and rescue training mission.

(h) A working member of a partnership may be deemed to be an employee entitled to the benefits provided by this chapter upon written acceptance, by endorsement, at the discretion of the insurance carrier for the partnership of an application for coverage by the working partner. The basis for computing premium payments and compensation benefits for the working partner shall be an assumed average monthly wage of not less than six hundred dollars nor more than the maximum wage provided in section 23‑1041 and is subject to the discretionary approval of the insurance carrier. Any compensation for permanent partial or permanent total disability payable to the partner shall be computed on the lesser of the assumed monthly wage agreed to by the insurance carrier on the acceptance of the application for coverage or the actual average monthly wage received by the partner at the time of injury.

(i) The sole proprietor of a business subject to this chapter may be deemed to be an employee entitled to the benefits provided by this chapter on written acceptance, by endorsement, at the discretion of the insurance carrier of an application for coverage by the sole proprietor. The basis for computing premium payments and compensation benefits for the sole proprietor shall be an assumed average monthly wage of not less than six hundred dollars nor more than the maximum wage provided by section 23‑1041 and is subject to the discretionary approval of the insurance carrier. Any compensation for permanent partial or permanent total disability payable to the sole proprietor shall be computed on the lesser of the assumed monthly wage agreed to by the insurance carrier on the acceptance of the application for coverage or the actual average monthly wage received by the sole proprietor at the time of injury.

(j) A member of the Arizona national guard, Arizona state guard or unorganized militia shall be deemed a state employee and entitled to coverage under the Arizona workers' compensation law at all times while the member is receiving the payment of the member's military salary from the state of Arizona under competent military orders or upon order of the governor. Compensation benefits shall be based upon the monthly military pay rate to which the member is entitled at the time of injury, but not less than a salary of four hundred dollars per month, nor more than the maximum provided by the workers' compensation law. No Arizona compensation benefits shall inure to a member compensable under federal law.

(k) Certified ambulance drivers and attendants who serve without pay or without full pay on a part‑time basis are deemed to be employees and entitled to the benefits provided by this chapter and the basis for computing wages for premium payments and compensation benefits for certified ambulance personnel shall be four hundred dollars per month.

(l) Volunteer workers of a licensed health care institution may be deemed to be employees and entitled to the benefits provided by this chapter upon written acceptance by the insurance carrier of an application by the health care institution for coverage of such volunteers. The basis for computing wages for premium payments and compensation benefits for volunteers shall be four hundred dollars per month.

(m) Personnel who participate in a search or rescue operation or a search or rescue training operation that carries a mission identifier assigned by the division of emergency management as provided in section 35‑192.01 and who serve without compensation as volunteer state employees. The basis for computation of wages for premium purposes and compensation benefits is the total volunteer man‑hours recorded by the division of emergency management in a given quarter multiplied by the amount determined by the appropriate risk management formula.

(n) Personnel who participate in emergency management training, exercises or drills that are duly enrolled or registered with the division of emergency management or any political subdivision as provided in section 26‑314, subsection C and who serve without compensation as volunteer state employees. The basis for computation of wages for premium purposes and compensation benefits is the total volunteer man‑hours recorded by the division of emergency management or political subdivision during a given training session, exercise or drill multiplied by the amount determined by the appropriate risk management formula.

(o) Regular members of the Arizona game and fish department reserve, organized pursuant to section 17‑214. The basis for computing wages for premium payments and compensation benefits for a member of the reserve is the salary received by game rangers and wildlife managers of the Arizona game and fish department for their first month of regular duty.

(p) Every person employed pursuant to a professional employer agreement.

(q) Members of the department of administration capitol police reserve, organized pursuant to section 41-794, are deemed to be employees. For the purposes of this chapter, the basis for computing wages for premium payments and compensation benefits for a member of the department of administration capitol police reserve who is a peace officer shall be the salary received by officers of the department of administration for their first month of regular duty as an officer.

7. "General order" means an order applied generally throughout the state to all persons under jurisdiction of the commission.

8. "Heart‑related or perivascular injury, illness or death" means myocardial infarction, coronary thrombosis or any other similar sudden, violent or acute process involving the heart or perivascular system, or any death resulting therefrom, and any weakness, disease or other condition of the heart or perivascular system, or any death resulting therefrom.

9. "Insurance carrier" means the state compensation fund and every insurance carrier duly authorized by the director of insurance to write workers' compensation or occupational disease compensation insurance in the state of Arizona.

10. "Interested party" means the employer, the employee, or if the employee is deceased, the employee's estate, the surviving spouse or dependents, the commission, the insurance carrier or their representative.

11. "Mental injury, illness or condition" means any mental, emotional, psychotic or neurotic injury, illness or condition.

12. "Order" means and includes any rule, direction, requirement, standard, determination or decision other than an award or a directive by the commission or an administrative law judge relative to any entitlement to compensation benefits, or to the amount thereof, and any procedural ruling relative to the processing or adjudicating of a compensation matter.

13. "Personal injury by accident arising out of and in the course of employment" means any of the following:

(a) Personal injury by accident arising out of and in the course of employment.

(b) An injury caused by the wilful act of a third person directed against an employee because of the employee's employment, but does not include a disease unless resulting from the injury.

(c) An occupational disease which that is due to causes and conditions characteristic of and peculiar to a particular trade, occupation, process or employment, and not the ordinary diseases to which the general public is exposed, and subject to section 23‑901.01.

14. "Professional employer agreement" means a written contract between a client and a professional employer organization:

(a) In which the professional employer organization expressly agrees to co‑employ all or a majority of the employees providing services for the client. In determining whether the professional employer organization employs all or a majority of the employees of a client, any person employed pursuant to the terms of the professional employer agreement after the initial placement of client employees on the payroll of the professional employer organization shall be included.

(b) That is intended to be ongoing rather than temporary in nature.

(c) In which employer responsibilities for worksite employees, including hiring, firing and disciplining, are expressly allocated between the professional employer organization and the client in the agreement.

15. "Professional employer organization" means any person engaged in the business of providing professional employer services. Professional employer organization does not include a temporary help firm or an employment agency.

16. "Professional employer services" means the service of entering into co‑employment relationships under this chapter to which all or a majority of the employees providing services to a client or to a division or work unit of a client are covered employees.

17. "Special order" means an order other than a general order.

18. "State compensation fund" includes the state compensation fund, accident benefit fund and occupational disease compensation fund in existence on January 2, 1969 and shall thereafter include all funds under the jurisdiction of the board of directors of the state compensation fund which have been derived from the assessment of premiums, interest, penalties and investment earnings for the payment of all workers' compensation and occupational disease compensation benefits.

19. 18. "Weakness, disease or other condition of the heart or perivascular system" means arteriosclerotic heart disease, cerebral vascular disease, peripheral vascular disease, cardiovascular disease, angina pectoris, congestive heart trouble, coronary insufficiency, ischemia and all other similar weaknesses, diseases and conditions, and also previous episodes or instances of myocardial infarction, coronary thrombosis or any similar sudden, violent or acute process involving the heart or perivascular system.

20. 19. "Workers' compensation" means workmen's compensation as used in article XVIII, section 8, Constitution of Arizona. END_STATUTE

Sec. 5. Section 23-961, Arizona Revised Statutes, is amended to read:

START_STATUTE23-961. Methods of securing compensation by employers; deficit premium; civil penalty

A. Employers shall secure workers' compensation to their employees in one of the following ways:

1. By insuring and keeping insured the payment of such compensation with the state compensation fund or an insurance carrier authorized by the director of insurance to write workers' compensation insurance in this state.

2. By furnishing to the commission satisfactory proof of financial ability to pay the compensation directly or through a workers' compensation pool approved by the commission in the amount and manner and when due as provided in this chapter. The requirements of this paragraph may be satisfied by furnishing to the commission satisfactory proof that the employer is a member of a workers' compensation pool approved by the commission pursuant to section 23‑961.01. The commission may require a deposit or any other security from the employer for the payment of compensation liabilities in an amount fixed by the commission, but not less than one hundred thousand dollars for workers' compensation liabilities. If the employer does not fully comply with the provisions of this chapter relating to the payment of compensation, the commission may revoke the authority of the employer to pay compensation directly.

B. An employer may not secure compensation to comply with this chapter by any mechanism other than as provided in this section. No insurance, combination or other program may be marketed, offered or sold as workers' compensation that does not comply with this section. An employer violates this chapter if the employer purchases or secures its obligations under this chapter through a substitute for workers' compensation that does not comply with this section.

C. Insurance carriers that transact the business of workers' compensation insurance in this state shall be subject to the rules of the director of insurance.

D. The director of insurance shall not issue to an insurance carrier a certificate of authority that authorizes the insurance carrier to transact workers' compensation insurance until the insurer deposits with the state treasurer, through the director of insurance, cash or securities. The state compensation fund shall also deposit cash or securities with the state treasurer, through the director of insurance, before transacting the business of workers' compensation insurance. The amount of cash or securities required under this subsection shall be at least equal to the greater of the following amounts:

1. One hundred thousand dollars.

2. The sum of subdivisions (a) and (b) of this paragraph less credits for approved reinsurance computed as of the preceding December 31 or other time as requested by the department of insurance for workers' compensation insurance written subject to the laws of this state:

(a) The aggregate of the present values at six per cent interest of all determined and estimated future direct reported loss and loss expense payments on compensation claims incurred more than three years immediately before the preceding December 31 or other time as requested by the department of insurance.

(b) The aggregate of the amounts determined for each of the three years immediately before the preceding December 31 or other time as requested by the department of insurance which that equals the greater of the following:

(i) Sixty‑five per cent of the earned premiums for the year less all direct reported loss and loss expense payments made on compensation claims incurred in the corresponding year.

(ii) The present value at six per cent interest of all determined and estimated future direct reported loss and loss expense payments on compensation claims incurred in that year.

E. On or before April 15 and on any date that the department of insurance specifically requests, an insurance carrier shall file with the department of insurance the information necessary to compute the required amount to be deposited pursuant to subsection D of this section and shall deposit any required additional amount.

F. An insurance carrier shall maintain at all times a deposit of cash or securities with the state treasurer, through the director of insurance, in an amount that is not less than the amount required under this section.

G. Cash or securities deposited pursuant to this section are subject to approval by the director of insurance at all times. The director of insurance shall hold the cash or securities for fulfillment of the obligations of the insurance carrier, including an insurance carrier acting as a reinsurer, under this chapter. The commission shall have a lien against the cash or securities deposited to the extent the special fund is liable to pay the obligations secured by the cash or securities.

H. Except in the event of nonpayment of premiums, each insurance carrier shall carry a risk to the conclusion of the policy period unless the policy is cancelled by the employer or unless one or both of the parties to a professional employer agreement terminate the agreement. The policy period shall be agreed upon by the insurance carrier and the employer.

I. At least thirty days' notice shall be given by the insurance carrier to the employer and to the commission of any cancellation or nonrenewal of a policy if the cancellation or nonrenewal is at the election of the insurance carrier. The insurance carrier shall promptly notify the commission of any cancellation by the employer or failure of the employer to renew the policy. The failure to give notice of nonrenewal if the nonrenewal is at the election of the insurance carrier shall not extend coverage beyond the policy period. An insurance carrier shall notify the commission on a form prescribed by the commission that it has insured an employer for workers' compensation promptly after undertaking to insure the employer.

J. Every insurance carrier, including the state compensation fund, on or before March 1 of each year shall pay to the state treasurer for the credit of the administrative fund, in lieu of all other taxes on workers' compensation insurance, a tax of not more than three per cent on all premiums collected or contracted for during the year ending December 31 next preceding, less the deductions from such total direct premiums for applicable cancellations, returned premiums and all policy dividends or refunds paid or credited to policyholders within this state and not reapplied as premiums for new, additional or extended insurance. Every self‑insured employer, including workers' compensation pools, on or before March 31 of each year shall pay a tax of not more than three per cent of the premiums which that would have been paid by the employer if the employer had been fully insured under a plan available from the state compensation fund by an insurance carrier authorized to transact workers' compensation insurance in this state during the preceding calendar year. The commission shall adopt rules that shall specify those the premium plans and methods to be used for the calculation of rates and premiums and that shall be the basis for the taxes assessed to self‑insured employers. The tax shall be not less than two hundred fifty dollars per annum and shall be computed and collected by the commission and paid to the state treasurer for the credit of the administrative fund at a rate not exceeding three per cent to be fixed annually by the industrial commission. The rate shall be no more than is necessary to cover the actual expenses of the industrial commission in carrying out its powers and duties under this title. Any quarterly payments of tax pursuant to subsection L of this section shall be deducted from the tax payable pursuant to this subsection.

K. An insurance carrier may reduce the amount of premiums paid by an employer by up to five per cent if all of the following apply:

1. The insured employer complies with the drug testing policy requirements prescribed in section 23‑493.04.

2. The insured employer conducts drug testing of prospective employees.

3. The insured employer conducts drug testing of an employee after the employee has been injured.

4. The insured employer allows the employer's insurance carrier to have access to the drug testing results under paragraphs 2 and 3 of this subsection.

L. Any insurer which that, pursuant to this section, paid or is required to pay a tax of two thousand dollars or more for the preceding calendar year shall file a quarterly report, in a form prescribed by the commission, accompanied by a payment in an amount equal to the tax due at the rates prescribed in subsection J of this section for premiums determined pursuant to subsection J of this section or an amount equal to twenty‑five per cent of the tax paid or required to be paid pursuant to subsection J of this section for the preceding calendar year. The quarterly payments shall be due and payable on or before the last day of the month following the close of the quarter and shall be made to the state treasurer.

M. If an overpayment of taxes results from the method prescribed in subsection L of this section the industrial commission may refund the overpayment without interest.

N. An insurer who fails to pay the tax prescribed by subsection J or L of this section or the amount prescribed by section 23‑1065, subsection A is subject to a civil penalty equal to the greater of twenty‑five dollars or five per cent of the tax or amount due plus interest at the rate of one per cent per month from the date the tax or amount was due.

O. Neither the state compensation fund nor An insurance carrier authorized to write workers' compensation insurance may not assess an employer premiums for services provided by a contractor alleged to be an employee under section 23‑902, subsection B or C, unless the fund or carrier has done both of the following:

1. Prepared written audit or field investigation findings establishing that all applicable factors for determining employment status under section 23‑902 have been met.

2. Provided a copy of such findings to the employer in advance of assessing a premium.

P. Notwithstanding section 23‑901, paragraph 6, subdivision (i), a sole proprietor may waive the sole proprietor's rights to workers' compensation coverage and benefits if both the sole proprietor and the insurance carrier of the employer subject to this chapter for which the sole proprietor performs services sign and date a waiver which that is substantially in the following form:

I am a sole proprietor, and I am doing business as (name of sole proprietor) . I am performing work as an independent contractor for (name of employer) . I am not the employee of (name of employer) for workers' compensation purposes, and, therefore, I am not entitled to workers' compensation benefits from (name of employer) . I understand that if I have any employees working for me, I must maintain workers' compensation insurance on them.

_________________________ _________________________

Sole proprietor Date

_________________________ _________________________

Insurance carrier DateEND_STATUTE

Sec. 6. Section 23-962, Arizona Revised Statutes, is amended to read:

START_STATUTE23-962. Insurance by governmental units; payment of premiums

A. Any county, city, town, municipal corporation or school district shall insure in any manner prescribed by the terms of section 23‑961. Effective July 1, 1983, this state through the department of administration shall self‑insure its liability, if any, under chapter 5 of this title and this chapter without the necessity of complying with the provisions of section 23‑961, subsection A, paragraph 2. On or before June 30, 1983, the state compensation fund and the department of administration shall enter into an interagency contract pursuant to title 11, chapter 7, article 3 for the return to this state of the reserves established and held by the state compensation fund for all claims against this state which that were incurred on or before that date. The first five hundred thousand dollars of These reserves shall be credited to the workers' compensation liability loss revolving fund established pursuant to section 41‑622, and the remainder shall be credited to the state general fund. The department of administration shall direct the continuing payment and processing of all claims against this state for injuries to state employees which that were incurred both before and after July 1, 1983. All claims payments shall be made or reimbursed by the department on behalf of this state and for expenses incurred in connection with the payment and processing of such claims. The department of administration may procure excess loss coverage from the state compensation fund an insurance carrier for individual or aggregate claims, or both, in such amounts and at such primary retention levels as the department of administration deems in the best interest of the state.

B. The clerk of the board of supervisors of each county, the clerk of each political subdivision and the superintendent of each school district which that insures its workers' compensation liability with the state compensation fund an insurance carrier shall furnish quarterly to the state compensation fund insurance carrier a true payroll showing the total amount paid to employees subject to the provisions of this chapter during each month of the quarter, segregated in accordance with the requirements of the state compensation fund insurance carrier.

C. Each clerk and school superintendent shall thereupon prepare and submit to his respective governing body for approval a claim for the amount of premiums due the state compensation fund insurance carrier. Such premiums shall be at once paid to the state compensation fund insurance carrier by the proper officer. The department of administration shall draw a warrant for such premiums as are due until June 30, 1983 from the state in favor of the treasurer for the benefit of the state compensation fund insurance carrier and the treasurer shall at once pay the warrant from the general fund and the appropriation made therefor in the general appropriation bill for the state compensation fund insurance carrier. END_STATUTE

Sec. 7. Section 23-963, Arizona Revised Statutes, is amended to read:

START_STATUTE23-963. Provisions of compensation insurance policy

Every policy of insurance covering the liability of the employer for workers' compensation, whether issued by the state compensation fund or by another, shall cover the entire liability of the employer to his employees covered by the policy or contract, and be deemed to contain the following provisions:

1. That as between the employee and the insurance carrier the notice to or knowledge of the occurrence of the injury on the part of the employer shall be deemed notice or knowledge of the insurance carrier.

2. That jurisdiction of the employer shall be jurisdiction of the insurance carrier.

3. That the insurance carrier shall be bound by and subject to the orders, findings, decisions and awards rendered against the employer for payment of compensation.

4. That the insolvency or bankruptcy of the employer and his discharge therein shall not relieve the insurance carrier or workers' compensation pool from payment of compensation for injuries or death sustained by an employee during the life of the policy or contract.END_STATUTE

Sec. 8. Section 23-966, Arizona Revised Statutes, is amended to read:

START_STATUTE23-966. Failure of employer or insurance carrier to pay claim or comply with commission order; reimbursement of funds

A. If an insurance carrier or self‑insured employer or other employer authorized by the commission to process or pay claims directly pursuant to this chapter does not fully comply with the provisions of the workers' compensation law relating to the processing or payment of compensation, medical benefits or the final orders of the commission, the workers' compensation claims shall be assigned by the commission to the state compensation special fund, and the state compensation fund shall process the established by section 23-1065. The special fund shall ensure that these claims are processed and pay such that compensation, benefits or amounts due on behalf of and under the direction of the special fund established by section 23-1065. The special fund shall periodically, but not less frequently than quarterly, reimburse the state compensation fund for the compensation, benefits or amounts so paid, together with reasonable administrative costs, necessary expenses and reasonable attorney fees are paid. The special fund may use third-party processors or other legal, medical, claims or labor market personnel to assist in the processing and payment of claims assigned under this section.

B. In addition to any reimbursement expenditures authorized under subsection A of this section, the special fund may use monies for any expense or service that is necessary to ensure that claims assigned under subsection A of this section are processed and paid, necessary to assist in the determination of liability of a claim that is assigned under this section or collected necessary to assist in the collection of monies owed to the special fund under this section, including collection against the cash, securities, bond and other assets of the insurance carrier or employer. These expenses may include travel, discovery procedures and employing any third-party processor, expert, consultant or professional, including an attorney, auditor, examiner or actuary. The special fund shall reimburse the administrative fund for all expenses incurred by the administrative fund related to the processing and payment of claims assigned under this section.

C. The special fund shall have a claim against the insurance carrier or employer for all monies that are spent or anticipated to be spent under this section, including administrative costs, necessary expenses and attorney fees. Any claim by the special fund shall be made on the cash, securities or bond filed under section 23-961 or applicable rules or on any other asset of the insurance carrier or employer.

D. The commission may increase the assessment established in section 23‑1065 by not to exceed one‑half of one per cent of such assessment in any one year to reimburse the special fund for its net loss incurred under this section. END_STATUTE

Sec. 9. Repeal

Sections 23-1005 and 23-1006, Arizona Revised Statutes, are repealed.

Sec. 10. Section 23-1021, Arizona Revised Statutes, is amended to read:

START_STATUTE23-1021. Right of employee to compensation

A. Every employee coming within the provisions of this chapter who is injured, and the dependents of every such employee who is killed by accident arising out of and in the course of his employment, wherever the injury occurred, unless the injury was purposely self‑inflicted, shall be entitled to receive and shall be paid such compensation for loss sustained on account of the injury or death, such medical, nurse and hospital services and medicines, and such amount of funeral expenses in the event of death, as are provided by this chapter.

B. Every employee who is covered by insurance in the state compensation fund and who is injured by accident arising out of and in the course of employment, and the dependents of every such employee who is killed, provided the injury was not purposely self‑inflicted, shall be paid such compensation from the state compensation fund for loss sustained on account of the injury and shall receive such medical, nurse and hospital services and medicines, and such amount of funeral expenses in event of death, as provided in this chapter.END_STATUTE

Sec. 11. Section 23-1026, Arizona Revised Statutes, is amended to read:

START_STATUTE23-1026. Periodical medical examination of employee; effect of refusal or obstruction of examination or treatment

A. An employee who may be entitled to compensation under this chapter shall submit himself for medical examination from time to time at a place reasonably convenient for the employee, if and when requested by the commission, the state compensation fund, his employer or the insurance carrier. A place is reasonably convenient even if it is not where the employee resides if it is the place where the employee was injured and the employer or the insurance carrier pays in advance the employee's reasonable travel expenses, including the cost of transportation, food, lodging and loss of pay, if applicable.

B. The request for the medical examination shall fix a time and place having regard to the convenience of the employee, his physical condition and his ability to attend. The employee may have a physician present at the examination if procured and paid for by himself.

C. If the employee refuses to submit to the medical examination or obstructs the examination, his right to compensation shall be suspended until the examination has been made, and no compensation shall be payable during or for such period.

D. A physician who makes or is present at the medical examination provided by this section may be required to testify as to the result thereof.

E. Upon appropriate application and hearing, the commission may reduce or suspend the compensation of an employee who persists in unsanitary or injurious practices tending to imperil or retard his recovery, or who refuses to submit to medical or surgical treatment reasonably necessary to promote his recovery.

F. An employee shall be excused from attending a scheduled medical examination if the employee requests a protective order and the administrative law judge finds that the scheduled examination is unnecessary, would be cumulative or could reasonably be timely scheduled with an appropriate physician where the employee resides. If a protective order is requested the burden is on the employer or insurance carrier to establish that a medical examination should be scheduled at a place other than where the employee resides. If an employee has left this state and the employer or insurance carrier pays in advance the employee's reasonable travel expenses, including the cost of transportation, food, lodging and loss of pay, if applicable, the employer or insurance carrier is entitled to have the employee return to this state one time a year for examination or one time following the filing of a petition to reopen. END_STATUTE

Sec. 12. Section 23-1029, Arizona Revised Statutes, is amended to read:

START_STATUTE23-1029. Repeal of chapter; effect on rights of parties

A. If the provisions of this chapter relative to compensation for injuries to or death of workmen are repealed, and the injury or death has not previously been compensated by lump payment or completed monthly payments, the period intervening between the injury or death and the repeal shall not be computed as a part of the time limited by law for the commencement of any action relating to such injury or death. The action shall be commenced within one year after the repeal and any amount paid as compensation shall be deducted from the right of recovery.

B. In event of such repeal, all money in the state compensation fund at the time of the repeal shall be subject to disposition by the legislature. END_STATUTE

Sec. 13. Section 23-1065, Arizona Revised Statutes, is amended to read:

START_STATUTE23-1065. Special fund; purposes; investment committee

A. The industrial commission may direct the payment into the state treasury of not to exceed one and one‑half per cent of all premiums received by the state compensation fund and private insurance carriers during the immediately preceding calendar year. The same percentage shall be assessed against self‑insurers based on the total cost to the self‑insured employer as provided in section 23‑961, subsection J. Such assessments shall be computed on the same premium basis as provided for in section 23‑961, subsections J, K, L, M and N and shall be no more than is necessary to keep the special fund actuarially sound. Such payments shall be placed in a special fund within the administrative fund to provide, at the discretion of the commission, such additional awards as may be necessary to enable injured employees to accept the benefits of any law of the this state or of the United States, or both jointly, for promotion of vocational rehabilitation of persons disabled in industry.

B. In claims involving an employee who has a preexisting industrially‑related permanent physical impairment of the type specified in section 23‑1044, subsection B and who thereafter suffers an additional permanent physical impairment of the type specified in such subsection, the claim involving the subsequent impairment is eligible for reimbursement, as provided by subsection D of this section, according to the following:

1. The employer in whose employ the subsequent impairment occurred or its insurance carrier is solely responsible for all temporary disability compensation to which the employee is entitled and for an amount equal to the permanent disability compensation provided by section 23‑1044, subsection B for the subsequent impairment. If the employee is determined to have sustained no loss of earning capacity after the medically stationary date, the employer or carrier shall pay him as a vocational rehabilitation bonus the amount calculated under this paragraph as a lump sum, which shall be a credit against any permanent compensation benefits awarded in any subsequent proceeding. The amount of the vocational rehabilitation bonus for which the employer or carrier is responsible under this paragraph shall be calculated solely on physical, medically rated permanent impairment and not on occupational or other factors.

2. If the commission determines that the employee is entitled to compensation for loss of earning capacity under section 23‑1044, subsection C or permanent total disability under section 23‑1045, subsection B, the total amount of permanent benefits for which the employer or carrier is solely responsible under paragraph 1 of this subsection shall be expended first, with monthly payments made according to the loss of earning capacity or permanent total disability award. The employer or carrier and the special fund are equally responsible for the remaining amount of compensation for loss of earning capacity under section 23‑1044, subsection C or permanent total disability under section 23‑1045, subsection B. This paragraph shall not be construed as requiring payment of any benefits under section 23‑1044, subsection B in any case in which an employee is entitled to benefits for loss of earning capacity under section 23‑1044, subsection C or permanent total disability benefits under section 23‑1045, subsection B.

C. In claims involving an employee who has a preexisting physical impairment which that is not industrially‑related and, whether congenital or due to injury or disease, is of such seriousness as to constitute a hindrance or obstacle to employment or to obtaining reemployment if the employee becomes unemployed, and the impairment equals or exceeds a ten per cent permanent impairment evaluated in accordance with the American medical association guides to the evaluation of permanent impairment, and the employee thereafter suffers an additional permanent impairment not of the type specified in section 23‑1044, subsection B, the claim involving the subsequent impairment is eligible for reimbursement, as provided by subsection D of this section, under the following conditions:

1. The employer in whose employ the subsequent impairment occurred or its carrier is solely responsible for all temporary disability compensation to which the employee is entitled.

2. The employer had knowledge of the permanent impairment at the time the employee was hired, or that the employee continued in employment after the employer acquired such knowledge.

3. The employee's preexisting impairment is due to one or more of the following:

(a) Epilepsy.

(b) Diabetes.

(d) Arthritis.

(e) Amputated foot, leg, arm or hand.

(f) Loss of sight of one or both eyes or a partial loss of uncorrected vision of more than seventy‑five per cent bilaterally.

(g) Residual disability from poliomyelitis.

(h) Cerebral palsy.

(i) Multiple sclerosis.

(j) Parkinson's disease.

(k) Cerebral vascular accident.

(l) Tuberculosis.

(m) Silicosis.

(n) Psychoneurotic disability following treatment in a recognized medical or mental institution.

(o) Hemophilia.

(p) Chronic osteomyelitis.

(q) Hyperinsulinism.

(r) Muscular dystrophies.

(s) Arteriosclerosis.

(t) Thrombophlebitis.

(u) Varicose veins.

(v) Heavy metal poisoning.

(w) Ionizing radiation injury.

(x) Compressed air sequelae.

(y) Ruptured intervertebral disk.

4. The employer or carrier and the special fund are equally responsible for the amount of compensation for loss of earning capacity under section 23‑1044, subsection C or permanent total disability under section 23‑1045, subsection B.

D. The employer or insurance carrier shall notify the commission of its intent to claim reimbursement for an eligible claim under subsection B or C of this section not later than the time the employer or insurance carrier notifies the commission pursuant to section 23‑1047, subsection A. Upon receiving notice the commission may expend funds from the special fund created by this section for travel and discovery procedures and for the employment of such independent legal, medical, rehabilitation, claims or labor market consultants or experts as may be deemed necessary by the commission to assist in the determination of the liability of the special fund, if any, under subsection B or C of this section. In the event there is any dispute regarding liability to the special fund pursuant to subsection B or C of this section, the commission shall not delay the issuance of a permanent award pursuant to section 23‑1047, subsection B.

E. If the special fund created by this section is determined to be liable under either subsection B or C of this section, the employer or insurance carrier which that is primarily liable shall pay the entire amount of the award to the injured employee and the commission shall by rule provide for the reimbursement of the employer or insurance carrier on an annual basis. In any case arising out of subsection B or C of this section, the written approval of the special fund is required for the compromise of any claim made pursuant to section 23‑1023. In any such case, written approval shall not be unreasonably withheld by the special fund, carrier, self‑insured employer or other person responsible for the payment of compensation. Failure to obtain the written approval of the special fund shall not cause the injured worker to lose any benefits but ends the special fund's liability for reimbursement and makes the employer or carrier solely responsible for the payment of the remaining benefits.

F. The employer or insurance carrier shall make its claim for reimbursement to the commission no later than November 1 each year, for payments made pursuant to subsection B or C of this section during the twelve months prior to October 1 each year. Claims shall be paid before December 31 each year. If the total annual reserved liabilities of the special fund obligated under subsections B and C of this section exceed six million dollars, as determined by the annual actuarial study performed pursuant to subsection I of this section, the commission, after notice and a hearing, may levy an additional assessment under subsection A of this section of up to one‑half per cent to meet such liabilities. Any insurance carrier or employer who may be adversely affected by the additional assessment may at any time prior to the sixtieth day after such additional assessment is ordered file a complaint challenging the validity of the additional assessment in the superior court in Maricopa county for a judicial review of the additional assessment. On judicial review the determination of the commission shall be upheld if supported by substantial evidence in the record considered as a whole.

G. In the event the injured employee is awarded additional compensation, under subsection A of this section, the commission retains jurisdiction to amend, alter or change the award upon a change in the physical condition of the injured employee resulting from the injury.

H. On receiving notice that the special fund may be liable under this chapter, the commission may spend monies from the special fund established by this section for expenses that are necessary to assist in the processing, payment or determination of liability of the fund. These expenses may include travel, discovery procedures and employing any legal, medical, rehabilitation, claims or labor market consultant, examiner or expert.

I. The commission shall cause an annual actuarial study of the special award fund to be made by a qualified actuary who is a member of the society of actuaries. The actuary shall make specific recommendations for maintaining the fund on a sound actuarial basis. The actuarial study shall be completed on or before September 1.

J. The special fund of the commission consists of all monies from premiums and assessments, except penalties assessed pursuant to this chapter, received and paid into the fund, property and securities acquired by the use of monies in the fund, interest earned on monies in the fund and other monies derived from the sale, use or lease of properties belonging to the fund. The special fund created by this section shall be administered by the director of the industrial commission, subject to the authority of the industrial commission. The director of the commission with approval of the investment committee, in the administration of the special fund, may provide loans, subject to repayment, budgetary review and legislative appropriation, to the administrative fund for the purposes and subject to section 23‑1081, acquire real property and acquire or construct a building or other improvements on the real property as may be necessary to house, contain, furnish, equip and maintain offices and space for departmental and operational facilities of the commission. The commission when using space constructed pursuant to this section shall make equal payments of rent on a semiannual basis, which shall be deposited in the special fund. The investment committee shall determine the amount of the rent, which must be at least equal to or greater than that determined by the joint committee on capital review for buildings of similar design and construction as provided by section 41‑792.01.

K. There is established an investment committee consisting of the director and the chairman of the commission and three persons knowledgeable in investments and economics appointed by the governor. Of the members appointed by the governor, one shall be a professional in the investment business, one shall represent workers' compensation insurers and one shall represent self‑insurers. The term of members appointed by the governor is three years, which shall begin on July 1 and end on June 30 three years later. The committee shall prescribe by rule investment policies and supervise the investment activities of the special fund.

L. Each member of the investment committee, other than the director of the commission, is eligible to receive from the special fund:

1. Compensation of fifty dollars for each day while in actual attendance at meetings of the investment committee.

2. Reimbursement for expenses pursuant to title 38, chapter 4, article 2.

M. The investment committee shall meet at least once every month.

N. The investment committee shall periodically review and assess the investment strategy.

O. The investment committee, by resolution, may invest and reinvest the surplus or reserves in the funds established under this chapter in any legal investments authorized under section 38‑719.

P. In addition to the investments authorized under section 38‑719, the investment committee may approve the investment in real property and improvements on real property to house and maintain offices of the commission, including spaces for its departmental and operational facilities. Title to the real estate and improvements on the real estate vests in the special fund of the commission, and the assets become part of the fund as provided by this section.

Q. The investment committee may appoint a custodian for the safekeeping of all or any portion of the investments owned by the special fund of the commission and may register stocks, bonds and other investments in the name of a nominee. Except for investments held by a custodian or in the name of a nominee, all securities purchased pursuant to subsection O of this section shall promptly be deposited with the state treasurer as custodian thereof, who shall collect the dividends, interest and principal thereof, and pay, when collected, into the special fund. The state treasurer shall pay all vouchers drawn for the purchase of securities. The director may sell any of the securities as the director deems appropriate, if authorized by resolution of the investment committee, and the proceeds therefrom shall be payable to the state treasurer for the account of the special fund upon delivery of the securities to the purchaser or the purchaser's agent. END_STATUTE

Sec. 14. Section 23-1070, Arizona Revised Statutes, is amended to read:

START_STATUTE23-1070. Medical, surgical and hospital benefits provided by employer

A. An employer, other than the state or a political subdivision thereof, who secures compensation to his employees in the manner provided in either section 23-961, subsection A, paragraph 1, or subsection A, paragraph 2 of section 23‑961, alone or jointly with other employers may, in lieu of making premium payments for medical, surgical and hospital benefits, may provide such benefits to injured employees and may collect one‑half of the cost thereof from his employees, not to exceed one dollar per month from any employee, which may be deducted from the wages of the employee.

B. An employer electing to provide such benefits shall notify his insurance carrier and the commission of the election and render a detailed statement of the arrangements made therefor to the commission.

C. An employer who maintains a hospital for his employees or who contracts with a physician for the hospital care of injured employees shall, on or before January 30 each year, shall make a verified written report to the commission for the preceding year showing the total amount of hospital fees collected and showing separately the amount contributed by the employees and the amount contributed by the employers. The report shall also contain an itemized account of the expenditures, investments or other disposition of the fees, and a statement showing the balance remaining.

D. An employer who fails to notify his insurance carrier and the commission of his election to provide such benefits, or who maintains a hospital or contracts for hospital service as provided in subsection C of this section, and fails to make the financial report required therein, is liable for such benefits as provided in section 23‑1062.

E. If the medical, surgical or hospital aid or treatment being furnished by an employer is such that there is reasonable ground to believe that the health, life or recovery of any employee is endangered or impaired thereby, the commission may, upon application of the employee or upon its own motion, may order a change of physicians or other conditions. If the employer fails to comply with the order promptly, the injured employee may elect to have medical, surgical or hospital aid or treatment provided by or through the state compensation special fund. In that event the claim of the injured employee against the employer shall be assigned to the state compensation special fund for the benefit thereof, and the state compensation special fund shall furnish to the insured employee medical, surgical or hospital aid or treatment as provided in this chapter. END_STATUTE

Sec. 15. Section 23-1091, Arizona Revised Statutes, is amended to read:

START_STATUTE23-1091. Assigned risk plan

A. An insurer may decline to issue a workers' compensation or occupational disease policy to an employer. An employer who is refused coverage by the state compensation fund and two or more other insurers shall be placed in the assigned risk plan established by this section.

B. There shall be only one workers' compensation assigned risk plan in this state. The director of the department of insurance shall contract with a qualified party to be the assigned risk plan administrator.

C. The administrator may charge all insurers transacting workers' compensation insurance in this state a reasonable fee to administer the assigned risk plan. Each insurer shall pay a share of the fee based on the insurer's share of the preceding calendar year's total net direct workers' compensation and occupational disease compensation insurance premiums written in this state.

D. The assigned risk plan administrator shall develop a plan of operation and, on approval by the director of the department of insurance, shall issue a directive for the equitable apportioning of assigned risks among all the insurers, including the state compensation fund. At any time, the director of the department of insurance may require the assigned risk plan administrator to amend the plan of operation. The plan shall include at least the following:

1. A method for the administrator to select one or more insurers transacting workers' compensation insurance in this state to act as servicing carriers. An administrator that is an insurer may act as its own servicing carrier. The administrator shall monitor the performance of the servicing carriers and shall measure performance against the administrator's established standards. A servicing carrier shall:

(a) Provide coverage for the risks placed in the assigned risk plan.

(b) Pay claims.

(d) Perform other activities that are related to the preliminary and subsequent effectuation of the contract and that arise out of the contract, including paying commissions to any licensed property and casualty agent or broker in this state.

2. A method for apportioning the workers' compensation assigned risks among all insurers, including the state compensation fund.

E. Unless the director determines decides to use another method, the rates used to determine the premiums of risks in the assigned risk plan are the rates annually filed with the director of the department of insurance by the designated rating organization pursuant to section 20‑357, subsection B, unless the director requires the use of rates from another rating organization, plus a uniform percentage increase that applies to all classifications, that is determined by the designated rating organization or, if the director directs, another rating organization and that is subject to approval by the director. The expected loss rates, ballast factors and other factors for use with the uniform experience rating plan as described in title 20, chapter 2, article 4 and filed with the director also apply to experience rated risks in the assigned risk plan.

F. Rating classifications used in the assigned risk plan shall conform to the uniform classification plan. Subclassifications and rating rule deviations shall not be used in the assigned risk plan.

G. All insurers participating in workers' compensation or occupational disease compensation insurance shall participate in the assigned risk plan.

H. Distribution of assignments among insurers shall be made in proportion to each insurer's share of the preceding calendar year's total net direct workers' compensation and occupational disease compensation insurance premium written in this state, as far as practicable.

I. An insurer that refuses to participate in the assigned risk plan shall not be authorized to write workers' compensation coverage in this state. If an insurer refuses to participate in the assigned risk plan after being authorized to write workers' compensation coverage in this state, the insurer's authorization shall be revoked. If an insurer withdraws from or is terminated from writing workers' compensation coverage in this state, the insurer remains responsible for all injuries sustained during the period of coverage stated in the policies of that insurer.END_STATUTE

Sec. 16. Section 41-791, Arizona Revised Statutes, is amended to read:

START_STATUTE41-791. Powers and duties relating to public buildings maintenance; compensation of personnel

A. The department is responsible for the direction and control of public buildings maintenance as prescribed in this article.

B. The department is responsible for the allocation of space, operation, alteration, renovation and security of the following buildings:

1. The state capitol executive tower of the state capitol building.

2. The state office buildings in Tucson.

3. All other buildings owned or leased by the state and located near the state capitol building and the state office buildings in Tucson, except for:

(a) Buildings occupied, operated and maintained by the following state agencies:

(i) The department of transportation.

(ii) The Arizona power authority.

(iii) The state compensation fund.

(b) The state capitol museum, the legislative services wing, house of representatives and senate wings of the state capitol building and the public records retention center subject to section 41‑1304.

(c) The department of economic security facilities purchased with federal funding assistance and exclusively and continuously operated and maintained for its own occupancy.

(d) The Arizona courts building.

C. The department is responsible for the maintenance of the following buildings and grounds:

1. The entire state capitol building and the grounds adjacent to it.

2. The state office buildings in Tucson and the grounds adjacent to them.

3. Other buildings and grounds owned or leased by the state if the function is not otherwise assigned, except for the interior of the Arizona courts building.

D. The director may establish rules for the operation, maintenance and security of buildings and grounds under his jurisdiction.

E. The department shall:

1. Employ engineers and maintenance and operations personnel as required, including a buildings manager for the state office buildings in Tucson.

2. Determine the hours of duty and assignment of personnel.

F. All personnel employed under this article are eligible to receive compensation as determined under section 38‑611. END_STATUTE

Sec. 17. Section 41-2501, Arizona Revised Statutes, is amended to read:

START_STATUTE41-2501. Applicability

A. This chapter applies only to procurements initiated after January 1, 1985 unless the parties agree to its application to procurements initiated before that date.

B. This chapter applies to every expenditure of public monies, including federal assistance monies except as otherwise specified in section 41‑2637, by this state, acting through a state governmental unit as defined in this chapter, under any contract, except that this chapter does not apply to either grants as defined in this chapter, or contracts between this state and its political subdivisions or other governments, except as provided in chapter 24 of this title and in article 10 of this chapter. This chapter also applies to the disposal of state materials. This chapter and rules adopted under this chapter do not prevent any state governmental unit or political subdivision from complying with the terms of any grant, gift, bequest or cooperative agreement.

C. All political subdivisions and other local public agencies of this state may adopt all or any part of this chapter and the rules adopted pursuant to this chapter.

D. The Arizona board of regents, and the legislative and judicial branches of state government and the state compensation fund are not subject to this chapter except as prescribed in subsection E of this section.

E. The Arizona board of regents and the judicial branch shall adopt rules prescribing procurement policies and procedures for themselves and institutions under their jurisdiction. The rules must be substantially equivalent to the policies and procedures prescribed in this chapter.

F. The Arizona state lottery commission is exempt from this chapter for procurement relating to the design and operation of the lottery or purchase of lottery equipment, tickets and related materials. The executive director of the Arizona state lottery commission shall adopt rules substantially equivalent to the policies and procedures in this chapter for procurement relating to the design and operation of the lottery or purchase of lottery equipment, tickets or related materials. All other procurement shall be as prescribed by this chapter.

G. The Arizona health care cost containment system administration is exempt from this chapter for provider contracts pursuant to section 36‑2904, subsection A and contracts for goods and services, including program contractor contracts pursuant to title 36, chapter 29, articles 2 and 3. All other procurement, including contracts for the statewide administrator of the program pursuant to section 36‑2903, subsection B, shall be as prescribed by this chapter.

H. Arizona industries for the blind is exempt from this chapter for purchases of finished goods from members of national industries for the blind and for purchases of raw materials for use in the manufacture of products for sale pursuant to section 41‑1972. All other procurement shall be as prescribed by this chapter.

I. Arizona correctional industries is exempt from this chapter for purchases of raw materials, components and supplies that are used in the manufacture or production of goods or services for sale entered into pursuant to section 41‑1622. All other procurement shall be as prescribed by this chapter.

J. The state transportation board and the director of the department of transportation are exempt from this chapter other than section 41‑2586 for the procurement of construction or reconstruction, including engineering services, of transportation facilities or highway facilities and any other services that are directly related to land titles, appraisals, real property acquisition, relocation, property management or building facility design and construction for highway development and that are required pursuant to title 28, chapter 20.

K. The Arizona highways magazine is exempt from this chapter for contracts for the production, promotion, distribution and sale of the magazine and related products and for contracts for sole source creative works entered into pursuant to section 28‑7314, subsection A, paragraph 5. All other procurement shall be as prescribed by this chapter.

L. The secretary of state is exempt from this chapter for contracts entered into pursuant to section 41‑1012 to publish and sell the administrative code. All other procurement shall be as prescribed by this chapter.

M. This chapter is not applicable to contracts for professional witnesses if the purpose of such contracts is to provide for professional services or testimony relating to an existing or probable judicial proceeding in which this state is or may become a party or to contract for special investigative services for law enforcement purposes.

N. The head of any state governmental unit, in relation to any contract exempted by this section from this chapter, has the same authority to adopt rules, procedures or policies as is delegated to the director pursuant to this chapter.

O. Agreements negotiated by legal counsel representing this state in settlement of litigation or threatened litigation are exempt from this chapter.

P. This chapter is not applicable to contracts entered into by the department of economic security:

1. With a provider licensed or certified by an agency of this state to provide child day care services or with a provider of family foster care pursuant to section 8‑503 or 36‑554.

2. With area agencies on aging created pursuant to the older Americans act of 1965 (P.L. 89‑73; 79 Stat. 218; 42 United States Code sections 3001 through 3058ee).

3. For services pursuant to title 36, chapter 29, article 2.

4. With an eligible entity as defined by Public Law 105‑285, section 673(1)(a)(i), as amended, for designated community services block grant program monies and any other monies given to the eligible entity that accomplishes the purpose of Public Law 105‑285, section 672.

Q. The department of health services may not require that persons with whom it contracts follow this chapter for the purposes of subcontracts entered into for the provision of the following:

1. Mental health services pursuant to section 36‑189, subsection B.

2. Services for the seriously mentally ill pursuant to title 36, chapter 5, article 10.

3. Drug and alcohol services pursuant to section 36‑141.

4. Domestic violence services pursuant to title 36, chapter 30, article 1.

R. The department of health services is exempt from this chapter for contracts for services of physicians at the Arizona state hospital.

S. Contracts for goods and services approved by the board of trustees of the public safety personnel retirement system are exempt from this chapter.

T. The Arizona department of agriculture is exempt from this chapter with respect to contracts for private labor and equipment to effect cotton or cotton stubble plow‑up pursuant to rules adopted under title 3, chapter 2, article 1. On or before September 1 of each year, the director of the Arizona department of agriculture shall establish and announce costs for each acre of cotton or cotton stubble to be abated by private contractors.

U. The Arizona state parks board is exempt from this chapter for purchases of guest supplies and items for resale such as food, linens, gift items, sundries, furniture, china, glassware and utensils for the facilities located in the Tonto natural bridge state park.

V. The Arizona state parks board is exempt from this chapter for the purchase, production, promotion, distribution and sale of publications, souvenirs and sundry items obtained and produced for resale.

W. The Arizona state schools for the deaf and the blind are exempt from this chapter when purchasing products through a cooperative that is organized and operates in accordance with state law if such products are not available on a statewide contract and are related to the operation of the schools or are products for which special discounts are offered for educational institutions.

X. Expenditures of monies in the morale, welfare and recreational fund established by section 26‑153 are exempt from this chapter.

Y. Notwithstanding section 41‑2534, the director of the state department of corrections may contract with local medical providers in counties with a population of less than four hundred thousand persons according to the most recent United States decennial census for the following purposes:

1. To acquire hospital and professional medical services for inmates who are incarcerated in state department of corrections facilities that are located in those counties.

2. To ensure the availability of emergency medical services to inmates in all counties by contracting with the closest medical facility that offers emergency treatment and stabilization.

Z. The department of environmental quality is exempt from this chapter for contracting for procurements relating to the water quality assurance revolving fund program established pursuant to title 49, chapter 2, article 5. The department shall engage in a source selection process that is similar to the procedures prescribed by this chapter. The department may contract for remedial actions with a single selection process. The exclusive remedy for disputes or claims relating to contracting pursuant to this subsection is as prescribed by article 9 of this chapter and the rules adopted pursuant to that article. All other procurement by the department shall be as prescribed by this chapter.

AA. The motor vehicle division of the department of transportation is exempt from this chapter for third party authorizations pursuant to title 28, chapter 13, only if all of the following conditions exist:

1. The division does not pay any public monies to an authorized third party.

2. Exclusivity is not granted to an authorized third party.

3. The director has complied with the requirements prescribed in title 28, chapter 13 in selecting an authorized third party.

BB. This section does not exempt third party authorizations pursuant to title 28, chapter 13 from any other applicable law.

CC. The state forester is exempt from this chapter for purchases and contracts relating to wild land fire suppression and pre‑positioning equipment resources and for other activities related to combating wild land fires and other unplanned risk activities, including fire, flood, earthquake, wind and hazardous material responses. All other procurement by the state forester shall be as prescribed by this chapter.

DD. The cotton research and protection council is exempt from this chapter for procurements relating to its aflatoxin control program and for contracts for research programs related to cotton production or protection.

EE. Expenditures of monies in the Arizona agricultural protection fund established by section 3‑3304 are exempt from this chapter. END_STATUTE

Sec. 18. Section 41-4151, Arizona Revised Statutes, is amended to read:

START_STATUTE41-4151. Definitions

In this article, unless the context otherwise requires:

1. "Agency":

(a) Means any board, commission, department or other administrative unit of this state established by the Constitution of Arizona or by enactment of the legislature.

(b) Includes the legislature, the courts and the governor.

2. "Agency web site" means an agency owned, operated or funded web site connected to the internet and includes web sites accessed through the "Arizona@yourservice" portal.

3. "Privacy policy statement" means a description of an agency's information practices. END_STATUTE

Sec. 19. Retroactivity

Section 20-367, Arizona Revised Statutes, as amended by this act, applies retroactively to July 1, 2010.

Sec. 20. Effective date

Sections 1, 2 and 4 through 18 of this act are effective on January 1, 2013.